Can I use both dependent care FSA and Dependent Care Tax Credit for the same child?

You can use both, but not for the same expenses! The Dependent Care FSA and the Dependent Care Tax Credit work together with some limitations. First, the $5,000 you put in the DCFSA is pre-tax money, which is great. For the Dependent Care Tax Credit, you can claim up to $3,000 in expenses for one child (or $6,000 for two or more). But here's the important part - you have to reduce your eligible expenses for the credit by what you put in your FSA. So with $12,000 in total childcare costs, if you use $5,000 in your FSA, you'd have $7,000 remaining. But you can only claim up to $3,000 of that for the credit for one child. The credit is then a percentage of that $3,000 based on your income.

Just wanted to share my experience using https://taxr.ai which totally saved me when I was in this exact situation last year! I had a dependent care FSA through my job but wasn't sure if I was maximizing my tax benefits correctly with the daycare credit. I uploaded my tax forms and within minutes got a personalized analysis showing exactly how to optimize between the FSA and tax credit. It showed me that in my specific situation, I was better off not maxing out my FSA and instead using the tax credit for some expenses because of my income level. Super helpful tool if you're trying to figure out the most beneficial way to handle childcare expenses!

I tried taxr.ai after seeing this thread and wow - it showed me I was leaving almost $800 on the table with how I was handling my dependent care expenses! I've been putting the full $5000 in my FSA for years without realizing that with my income level and two kids, I should've been splitting things differently between the FSA and the tax credit. The analysis broke down exactly why this was happening based on my tax bracket and the credit percentage I qualify for. Just submitted the paperwork to adjust my FSA contribution for next year. Thanks for recommending this!

If you're having trouble getting clear answers from the IRS about this (which I did when I was in your situation), check out https://claimyr.com - they got me through to an actual IRS agent in under 15 minutes when I was completely stuck trying to figure out how to handle my dependent care FSA and tax credit situation. I spent DAYS trying to call the IRS myself with no luck. The IRS agent I finally spoke to walked me through exactly how to handle my situation (which was complicated because I'd changed jobs mid-year and had two different FSA accounts). You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. It seriously saved me hours of frustration and probably prevented me from making an expensive mistake.

I have to eat crow here. After being totally suspicious about that Claimyr service mentioned above, I actually tried it yesterday out of desperation because I've been trying to reach the IRS for TWO WEEKS about my dependent care credit question. Got connected to an IRS agent in about 22 minutes while I just went about my day. The agent confirmed exactly what I needed to know about coordinating my FSA with the dependent care credit. For what it's worth, she told me that with one child, the $5000 FSA would use up most of my eligible expenses for the $3000 credit limit (leaving me only able to claim a credit on an additional $3000 - $5000 = -$2000, which obviously doesn't work). But if we had two kids, we could use both since the limit would be $6000 for the credit.

One thing to consider is your income level - the Dependent Care Credit phases out as your income increases. If you and your spouse have a high combined income, you might get more benefit from maxing out the FSA since you'll get less from the credit anyway. My accountant told me that for our income (around $125k), we're better off maxing the FSA first, then taking whatever credit we can get after that.

Does anyone know if you can split the expenses? Like could I put $3000 in the FSA and claim $3000 for the tax credit (with my $12000 total daycare cost)? Would that be better than maxing out the FSA first?

@Andre Moreau - I was in almost the exact same situation last year! With one child and $12k in daycare costs, here's what I learned: Since you have one child, the dependent care tax credit is limited to $3,000 in expenses. If you put the full $5,000 in your FSA, you've already exceeded that $3,000 limit, so you won't be able to claim any tax credit. Here's what might work better for you: Put $3,000 in the FSA and keep $3,000 available for the tax credit. Whether this is optimal depends on your income level. The FSA saves you money at your marginal tax rate plus FICA (about 29.65% if you're in the 22% bracket), while the dependent care credit ranges from 20-35% based on income. If you're at higher income levels, the FSA might give you better savings. If you're at lower income levels, the credit percentage could be higher than your tax savings from the FSA. Given that you mentioned your husband makes more than you and you've had IRS issues before, I'd definitely recommend running the numbers both ways or consulting with a tax professional to make sure you're maximizing your benefit without any complications!